Case Note & Summary
The dispute arose from two licence agreements dated 27.08.1990 between the appellants (M/s Arun Kumar Kamal Kumar & Ors.) and the respondents (M/s Selected Marble Home & Ors.) for running a restaurant and sweets shop under the brand name 'Nathu's Sweets' at the respondents' premises on a commission basis. The appellants alleged that the respondents violated the terms by failing to provide adequate electricity supply, leading to business closure from March 1991 to October 1995. The respondents filed a suit under Section 20 of the Arbitration Act, 1940, and an arbitrator was appointed. The arbitrator framed 16 issues, including an additional issue on damages (Issue No. 15A). The appellants submitted a statement of accounts based on audited accounts, which the arbitrator used to calculate damages for the closure period. The arbitrator published an award on 16.03.1998, which was challenged by the appellants. The learned Single Judge of the Delhi High Court rejected the objections and made the award rule of the court. The Division Bench upheld the award but reduced the post-award interest from 16% to 9% per annum, subject to payment by 30.06.2010. The appellants appealed to the Supreme Court, arguing that they were not liable for damages as the agreements did not provide for damages, and that the statement of accounts contained errors. The Supreme Court dismissed the appeal, holding that the appellants were liable for damages for use and occupation during the closure period, as even if the relationship was treated as tenancy, the tenant is liable for rent under Section 108 of the Transfer of Property Act. The Court also found no merit in the contention regarding errors in the statement of accounts, as the statement was based on audited accounts and TDS was deducted. The Court upheld the reduction of interest by the Division Bench.
Headnote
A) Arbitration Law - Arbitral Award - Challenge under Section 30 of Arbitration Act, 1940 - Damages for Use and Occupation - The appellants, licensees, retained possession of premises even after business closure. The Arbitrator awarded damages based on average commission. The High Court upheld the award. The Supreme Court found no error, holding that even if the relationship is treated as tenancy, the tenant is liable for rent/damages under Section 108 of the Transfer of Property Act, 1882. (Paras 12-14) B) Evidence - Statement of Accounts - Errors on Face of Record - The appellants contended that the statement of accounts submitted by them contained inadvertent errors regarding deduction of sales tax and electricity/water expenses. The Supreme Court rejected this contention, noting that the statement was based on audited accounts and TDS was deducted, and the errors were not apparent on the face of the record. (Paras 15-16) C) Interest - Post-Award Interest - Reduction by High Court - The Division Bench reduced the rate of interest from 16% per annum to 9% per annum for future interest from the date of the award, subject to payment by a specified date. The Supreme Court did not interfere with this reduction. (Para 1)
Issue of Consideration
Whether the appellants are liable to pay damages for the period during which the business was closed but they retained possession of the premises, and whether the statement of accounts contained errors that were apparent on the face of the record.
Final Decision
The Supreme Court dismissed the appeal, upholding the judgment of the Division Bench of the Delhi High Court. The Court found no error in the finding that the appellants were liable for damages for use and occupation during the closure period, and that the statement of accounts did not contain errors apparent on the face of the record. The reduction of post-award interest from 16% to 9% per annum was also upheld.
Law Points
- Arbitration Act
- 1940
- Section 20
- Section 30
- Transfer of Property Act
- 1882
- Section 108
- Damages for use and occupation
- Licence agreement
- Arbitral award
- Interest reduction
